New Delhi: Removing legal hurdles, Delhi High Court Monday upheld Delhi govt’s move to entrust the audit of power discoms BSES Rajdhani and BSES Yamuna to Comptroller and Auditor General of India (CAG).A vacation bench of Justice Tejas Karia dismissed a petition by the power distribution companies, pointing out that it is still at the stage of a proposal and no audit has begun, so the challenge is premature at this stage.Delhi govt’s June 6 communication is only a show-cause notice and not a final decision since it proposes entrusting the audit of the petitioners to CAG and has no adverse finding that merits any interference by the court, the court said, adding that it merely gives the power distribution companies an opportunity to submit their representation and appear for a hearing before the authorities.“The proceedings to be conducted pursuant to the impugned notice under Section 20(3) of CAG Act shall be decided by the competent authority after affording the petitioners an opportunity of hearing and upon due consideration of all submissions that may be advanced by the petitioners on merits, without being influenced in any manner by the observations made hereinabove,” it underlined.The court was dealing with petitions by BSES challenging the June 6 notice as illegal and contrary to judicial pronouncements, including a Supreme Court judgment, which foreclose such an audit.The plea argued that the notice violated earlier judicial decisions, including a 2015 verdict in the URJA case, which had quashed an earlier attempt to subject the private discoms to a CAG audit.The discoms also relied upon orders passed by Appellate Tribunal for Electricity (APTEL) in April and May 2026, which had set aside an earlier proposal for a CAG audit and directed Delhi Electricity Regulatory Commission (DERC) to appoint a chartered accountant to conduct an intensive audit in terms of directions issued by Supreme Court in the regulatory assets (RA) judgment delivered on Aug 6, 2025.The high court, however, observed that the audit notice “cannot be regarded as adverse” to the petitioners and that it was in line with the statutory requirement of providing an opportunity of being heard before the audit is handed over to CAG by lieutenant governor.It held there was no “mischaracterisation” of the judicial decisions, and there was no legal impediment preventing DERC or Delhi govt from initiating a CAG audit in this case.The court clarified that the Supreme Court’s verdict did not prohibit audit of BSES discoms by CAG as long as it was done as per the provisions of CAG Act nor did the URJA judgment bar the current proposal for a CAG audit.It said the current audit was linked to implementation of Supreme Court’s directions regarding the prolonged accumulation of regulatory assets affecting consumers. Also, the petitioners have now been afforded an opportunity of hearing, it noted, adding that the proposed audit is not an attempt by Delhi govt to conduct a parallel regulatory exercise or interfere with tariff fixation powers of DERC.Backing its audit notice, Delhi govt opposed the petition on the grounds that it was premature, but maintained that the audit of the petitioners was necessary in public interest and in conformity with the directions issued by Supreme Court, which required a “strict and intensive audit of the circumstances” in which the distribution companies continued without recovering regulatory assets.An independent audit was essential to verify the petitioners’ true and fair financial position, particularly in view of the likelihood of related-party transactions or diversion of funds, it contended.
